Wells Capital Management's Chief Investment Strategist Jim Paulsen said Tuesday's record high on the Dow Jones industrial average was fueled by stronger economic fundamentals, not just a "sugar high" from the Fed's aggressive monetary policy to pump money into the economy.

The Dow closed Tuesday at 14,253.77, up 125.95, trouncing the previous record 14,164.53 set in October 2007, when the Fed was still reassuring Americans that the subprime mortgage crisis was contained. At the time, Fed critic Jim Grant, editor of Grant's Interest Rate Observer, agreed, saying the Fed was successful in containing the crisis to planet Earth.

While the 2007 high was set amid an era of easy lending, today's record Dow occurs with no shortage of worries over economic reports coming in from around the globe (China, Italy and Spain, to name just a few) and widespread skepticism on the merits of investing in stocks.

Paulsen, who has long been bullish amid anemic economic growth, is having none of it.

"The performance of the overall stock market and the relative price performances of individual stock sectors appear to be tied to 'fundamental economic improvements,'" Paulsen said in a report this week to clients of Wells Capital Management, part of Wells Fargo. (NYSE: WFC)

"Because this bull market is primarily fundamentally based, it is probably more sustainable and more impervious to the end of monetary assistance than most appreciate," Paulsen said.

He points to several signposts of improving fundamentals, including households' debt-service burdens falling from a record high in 2007 to near a record low, the strength of corporate profits, and a rise in bank lending over the past year or so.

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